The overall cost to employers to comply with the City of Detroit's living wage law are minimal. For more than half of employers with city contracts of more than $50,000, the maximum cost increases represent under one percent of the funds they receive for the contract work. At most, one-quarter of employers experience costs equal to five to nine percent of the contract value. No employers see increased costs of 10 percent or more.

It is also estimated that firms receiving financial assistance such as the Empowerment Zone tax programs or the Industrial Facilities Tax Exemption would incur costs under one percent of their annual operating budgets.

Wayne State researcher David Reynolds, Ph.D, studied 585 service contracts with 352 employers who have contracts with the City of Detroit for more than $50,000 each. The value of these contracts totaled $366 million and covered an estimated 5,786 workers. The study, a joint effort by Wayne State's Center for Urban Studies and Labor Studies Center, was supported by a resolution passed in May 1999 by the Detroit City Council.

Given the modest costs involved in meeting the living wage requirements, it is unlikely that many city contractors would increase their bids on city contracts. However, even if all of the wage increases were passed entirely to the city, the amount would represent less than three-tenths of one percent of the City of Detroit's budget.

The impact of the living wage ordinance on local non-profit organizations would also range from small to modest, between under one percent and 6.8 percent of total funds received. If the wage increases were passed on to the city in the form of higher bids, the costs would represent a fraction of a percent of the city's annual budget. It is expected that most non-profit organizations will not fall under the law's requirements since most receive grants or contracts under the law's $50,000 threshold.

Given the modest costs involved with living wage compliance, there is little reason to believe that employers will alter negatively their employment or investment patterns in response to the living wage law.

In terms of benefits to workers, regarding contracts alone, approximately 2,300 workers likely will benefit from the living wage. Of these, 85 percent could see immediate wage gains whose average ranges from $1,312 to $4,439 per year. In addition, 50 percent could gain full family health coverage. Social service work is an industry that could benefit significantly since it typically offers some of the lowest wages. Increased wages also could help stabilize employment in social services.

The study uses methodology applied to research on living wage ordinances in Los Angeles, Baltimore and Miami.